Tax & Legal Info In Portugal

Corporate tax


INCOME TAX

CORPORATE INCOME TAX (IRC)

Portuguese Corporate Income Tax ('Imposto sobre o Rendimento das Pessoas Colectivas' or IRC) is applicable to either the income obtained by resident or non-resident entities. Regarding non-resident entities it taxes only their income obtained in Portuguese territory, as to the resident entities it taxes their global income, either from internal or external source. The taxation period is normally the civil year, but it can be adopted a different one in some special cases. Transfer Pricing rules apply in Portugal. Thin Capitalization Rules apply only to entities resident outside the UE. Resident entities are normally taxed through the delivery of the respective Income Statement ('Declaração Modelo 22') for their global income. Non-resident entities may be taxed either by definitive withholding tax or are obliged to the delivery of the Declaração Modelo 22 in some situations (namely in case of capital gains).

Residents Tax Rate Obs.
Corporate entities 23%
Applicable to the overall income on the delivery of the respective annual income statement. The first 15.000Eur of taxable income is taxed at the rate of 17% for small and medium businesses. Amounts withheld may be credited against the IRC due.
Branch of foreign companies 23%
Municipal Surcharge 0%-1,5%
Tax Rate applicable to taxable income calculated before considering tax losses carried forward.

Non-Residents Tax Rate Obs.
Capital Gains (Securities) 28%
Capital Gains on Government and Corporate Bonds are exempt. There is also an exemption for securities negotiated in regulated stock-markets regarding securities issued by Portuguese entities. Anti-abuse regulations may apply. Annual Income Statement must be delivered.
Capital Gains (Real Estate) 28%
Annual Income Statement must be delivered.
Dividends 28%
This tax may be reduced or eliminated according to double tax treaties or Parents-Subsidiary Directive.
Interests 28%
This tax rate may be reduced up to 10% according to double tax treaties or Directive n.º 2003/49/CE.
Bonds Exempt
This tax exemption is applicable to either interests or capital gains on both, government and corporate bonds. Anti-abuse regulations may apply.
Royalties 25%
This tax rate may be reduced up to 5% according to double tax treaties or Directive n.º 2003/49/CE.
Other services 25%
Some exceptions may apply. This tax may be reduced or eliminated according to double tax treaties.

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INDIRECT TAX

VALUE ADDED TAX (VAT)

Portuguese VAT is a consumption tax, applicable to every transaction of goods, rendering of services, importations and EU acquisition of goods. It has a reasonable degree of harmonization towards EU legislation. There are several exemptions and tax reductions available, meaning that a case by case analysis of every operation is needed in order to apply the most suitable tax frame.

  Tax Rate Obs.
General Rate 23%
Levied on goods and services in general.
Intermediate rate 13%
Levied namely on some kind of food products and restaurants.
Reduced rate 6%
Levied namely on essential food products, books and hotels.
Note: Some exemptions may apply, namely on financial services, real estate and health care services. Madeira and Açores have lower VAT rates applicable.

STAMP DUTY TAX (SDT)

Stamp Duty Tax is levied, namely, on financial, insurance and real estate operations, share capital increases and inheritance transmissions.

Taxable Operation Tax Rate Obs.
Credit operations and guarantees up to 0,6%
Some exemptions may apply namely in operations with respective share holders and between financial institutions.
Insurance premium up to 9%
Some kind of insurance may be exempt.
Real estate acquisitions 0.8%
Acquisition of donation of property rights on real estate property
Share capital increases 0.4%
Share capital increases in cash are not subjected to SDT
Inheritance transmissions 10.0%
Some realities may be exempt from SDT, namely the following:
- Transmitions between first degree relatives;
- Investment and pension funds transmitions.

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PROPERTY TAX

PROPERTY TRANSFER TAX (IMT)

Property Transfer Tax is supported by the respective buyer entity, every time an asset concerning real estate located in the Portuguese territory is acquired.

  Tax Rate Obs.
Personal residence 0%-6%
Progressive tax rate with the maximum ceiling for Real Estate over EUR 574.323.
Residential Real Estate 1%-6%
Progressive tax rate with the maximum ceiling for Real Estate over EUR 550.836.
Other real estate for construction purposes 6.5% -
Farm Land 5% -
Note: Anti-abuse regulations may apply, namely an 10% flat tax rate is applicable to tax haven resident owners. Some exemptions may apply.

REAL ESTATE MUNICIPAL TAX (IMI)

Real Estate Municipal Tax is an annual tax that is due by whom is the owner of the real estate on the 31st of December of the respective year. Tax rates are determined by each municipal.

Taxable Operation Tax Rate Obs.
Real estate (urban) 0,3%-0,5%
Empty or unoccupied Real Estate buildings for more than one year ought to be taxed at triple of the mentioned tax rates.
Real estate (rural) 0,8%
Municipalities can double the rates in case of forest land in a situation of abandonment
Note: Anti-abuse regulations may apply, namely a 7,5% flat tax rate is applicable to tax haven resident owners. Some exemptions may apply.

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AZORES

CORPORATE INCOME TAX (IRC) AND PERSONAL INCOME TAX (IRS)

Income tax rates applicable to residents in Azores are, in general terms, 30% (for corporate entities) and 20% (for individuals), lower than equivalent tax rates applied in mainland.

Major Taxes Tax Rate Obs.
IRC - Corporate resident entities 17.5%
Applicable to the overall income on the delivery of the respective annual income statement. Amounts withheld may be credited against the IRC due.
IRS - Resident individuals up to 33,6%
Progressive tax rate applicable to the overall income on the delivery of the respective annual income statement. Amounts withheld may be credited against the IRS due.

VALUE ADDED TAX (VAT)

Reduced VAT rates are applicable to operations considered localized in Açores territory.

  Tax Rate Obs.
General Rate 18%
Levied on goods and services in general.
Intermediate rate 10%
Levied namely on some kind of food products and restaurants.
Reduced rate 5%
Levied namely on essential food products, books and hotels.
Note: Some exemptions may apply, namely on financial services, real estate and health care services.

OTHER BENEFITS

There are several tax benefits available to entities investing in Açores, namely exemptions on profits reinvested or contractual tax benefits for bigger investment projects (namely exemptions on SDT, on Property Tax and additional deductions on IRC).


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MADEIRA

CORPORATE INCOME TAX (IRC) AND PERSONAL INCOME TAX (IRS)

Income tax rates applicable to residents in Madeira are, in general terms, 30% (for corporate entities) and 20% (for individuals), lower than equivalent tax rates applied in mainland.

Major Taxes Tax Rate Obs.
IRC - Corporate resident entities 20%
Applicable to the overall income on the delivery of the respective annual income statement. Amounts withheld may be credited against the IRC due.
IRS - Resident individuals up to 41%
Progressive tax rate applicable to the overall income on the delivery of the respective annual income statement. Amounts withheld may be credited against the IRS due.

VALUE ADDED TAX (VAT)
 

Reduced VAT rates are applicable to operations considered localized in Madeira.

  Tax Rate Obs.
General Rate 22%
Levied on goods and services in general.
Intermediate rate 12%
Levied namely on some kind of food products and restaurants.
Reduced rate 5%
Levied namely on essential food products, books and hotels.
Note: Some exemptions may apply, namely on financial services, real estate and health care services.

OTHER BENEFITS

There are several tax benefits available to entities investing in Madeira, namely exemptions on profits reinvested or contractual tax benefits for bigger investment projects (namely exemptions on SDT, on Property Tax and additional deductions on IRC).


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MADEIRA FREE ZONE (MFZ)
 

Madeira Free Zone is a restricted area where companies may develop their activity and benefit from one of the most favourable tax regimes in the European Jurisdictions. In addition it is a tax regime accepted by the EU authorities.


CORPORATE INCOME TAX (IRC) AND PERSONAL INCOME TAX (IRS)

Special Tax Regime on MFZ is applicable to entities established on that same territory, regarding the respective income obtained outside the Portuguese territory.

Major Taxes Tax Rate Obs.
IRC - Corporate resident entities 5%
- 5% reduced tax rate applicable from 01/01/2013 until 31/12/2020. Requirements of minimum investment must be fulfilled. Benefit applicable to a maximum of EUR 250.500.000 of taxable profit.
IRC and IRS - Shareholders on MFZ corporate entities Exempt
Exemption applicable to dividends paid and to interests paid by MFZ corporate entities.

VALUE ADDED TAX (VAT)

MFZ is a territory located in Madeira, so the same reduced VAT rates applicable to Madeira territory are applicable to MFZ. There may be additional exemptions or other benefits applicable to MFZ. A case by case analysis should be adopted.

  Tax Rate Obs.
General Rate 14%
Levied on goods and services in general.
Intermediate rate 8%
Levied namely on some kind of food products and restaurants.
Reduced rate 4%
Levied namely on essential food products, books and hotels.
Note: Some exemptions may apply, namely on financial services, real estate and health care services.

OTHER BENEFITS

General exemption on SDT on the operations executed by these entities. General IRC exemption applicable to income related, namely , to royalties and services rendering paid to non-resident entities."


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PORTUGUESE INVESTMENT FUNDS
 

There are three major different types of Investment Funds, considering the tax regime in Portugal: - Securities Investment Funds (FIM); - Real Estate Investment Funds (FII); - Funds of Funds (FF). Investment Funds are a very tax efficient vehicle for some kind of investments, given its global tax frame, specially in some particular cases, like the Urban Real Estate Rehabilitation investments made in the historical city centres. There also additional tax benefits for these kind of investment vehicles, namely, in terms of property tax. Regarding Investment Funds Tax regime in Portugal there are two levels of taxation: - Taxation of the Funds' income; - Taxation of the Unit holders' income (investors).


TAXATION OF THE FUND'S INCOME

SECURITIES INVESTMENT FUNDS (FIM)
Type of investments Tax Rate Obs.
Securities Capital Gains 10% -
Other income 20% to 25%
Tax rates may vary, majorly, between these values depending on the type on income.

REAL ESTATE INVESTMENT FUNDS (FII)
Type of investments Tax Rate Obs.
Real Estate Income (rents) 20% -
Real Estate Capital Gains 12.5% -
Other income FIM's tax rates
The taxation is made in a similar way as to FIM for the same type of income.

FUNDS OF FUNDS (FF)
Type of investments Tax Rate Obs.
Income from units of other investment funds Exempt -
Other income FIM and FII's tax rates
The taxation is made in a similar way as to FIM and FII for the same type of income.

FII FOR URBAN REHABILITATION AND FOREST RESOURCES INVESTMENTS
Type of investments Tax Rate Obs.
Global income Exempt -

TAXATION OF THE UNIT HOLDERS' INCOME

SECURITIES AND REAL ESTATE INVESTMENT FUNDS (FIM AND FII)
Type of investments Tax Rate Obs.
Resident Individuals (IRS) FII and FIM units Exempt
There is an option available to tax this income together with the respective overall income.
In this case, amounts withheld to the fund may be credited against the IRS due.
FII and FIM units' Capital Gains 10%
There is an option available to tax this income together with the respective overall income.
Corporate (IRC and IRS under a commercial activity) FII and FIM units Respective IRS or IRC rate
Applicable to the overall income on the delivery of the respective annual income statement. Amounts withheld to the fund may be credited against the IRS/IRC due.
FII and FIM units' Capital Gains Respective IRS or IRC rate
Applicable to the overall income on the delivery of the respective annual income statement.

Non-residents (IRS or IRC)

 

 

FII and FIM units Exempt -
FII and FIM units' Capital Gains Exempt -

FUNDS OF FUNDS (FF)
Type of investments Tax Rate Obs.
Resident Individuals (IRS) FF units Exempt -
FF units' Capital Gains 10%
There is an option available to tax this income together with the respective overall income.
Corporate (IRC and IRS under a commercial activity) FF units Respective IRS or IRC rate
Applicable only to 40% of the respective income to be taxed together with the overall income on the delivery of the respective annual income statement.
FF units' Capital Gains Respective IRS or IRC rate
Applicable to the overall income on the delivery of the respective annual income statement.
Non-residents (IRS or IRC) FF units Exempt -
FF units' Capital Gains Exempt -

FII FOR URBAN REHABILITATION AND FOREST RESOURCES INVESTMENTS
Type of investments Tax Rate Obs.
Resident Individuals (IRS) FII units 10%
There is an option available to tax this income together with the respective overall income.
FII units' Capital Gains 10%
There is an option available to tax this income together with the respective overall income.
Corporate (IRC and IRS under a commercial activity) FII units Respective IRS or IRC rate
Applicable to the overall income on the delivery of the respective annual income statement.
FII units' Capital Gains Respective IRS or IRC rate
Applicable to the overall income on the delivery of the respective annual income statement.
Non-residents (IRS or IRC) FII units Exempt -
FII units' Capital Gains Exempt -

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SOCIAL SECURITY

SOCIAL SECURITY CONTRIBUTIONS (SS) - EMPLOYED PEOPLE

Both the employer and the employee entities are obliged to SS contributions.

  Tax Rate Obs.
SS contribution of the employer 23.75% -
SS contribution of the employee 11% -
Note: The employer must deliver both the contributions until the 15 of the month following the month they refer to.

SOCIAL SECURITY CONTRIBUTIONS (SS) - BOARD MEMBERS

Both the corporate entities and board members individuals are obliged to SS contributions.

  Tax Rate Obs.
SS contribution of the company 23.75% -
SS contribution of the individuals 11% -
Note: The company must deliver both the contributions until the 15 of the month following the month they refer to.






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